The Success Guardian

How to Get Rid of Private Mortgage Insurance (PMI) Faster

Private Mortgage Insurance (PMI) is one of those recurring costs that can quietly add hundreds of dollars to your monthly mortgage payment. The good news: in most cases you don’t have to live with PMI forever. This guide walks you through practical, realistic ways to drop PMI faster—backed with examples, cost figures, and expert tips so you can make an informed decision that fits your financial situation.

What is PMI and why does it matter?

PMI protects the lender if a borrower defaults on a conventional loan when the down payment is less than 20% of the home’s purchase price. It doesn’t protect you—it protects the lender—so removing PMI as soon as you’re eligible can free up cash for saving, investing, or paying down your mortgage faster.

Typical PMI rates vary widely depending on the down payment, credit score, and loan type. Rates commonly fall in the 0.3%–1.5% annual range. For example, on a $380,000 loan, a 0.85% PMI rate costs about $3,230 per year or roughly $270 per month:

The official rules: when PMI must be removed

Federal law gives borrowers protections that make PMI removal straightforward if you meet the rules. The two main rules are:

• Automatic termination: Your servicer must cancel PMI automatically when your loan reaches 78% of the original value (original purchase price or appraised value at loan origination), assuming you are current on payments.
• Borrower-requested cancellation: You can request cancellation once your balance reaches 80% of the original value. The lender will verify you meet conditions (payments current, no other liens, property condition acceptable).

Keep in mind: “original value” typically refers to the purchase price or the original appraised value—not a later, higher market value. However, if your home has appreciated, you can sometimes use a new appraisal to show you already have 20% equity based on current value (see appraisal route below).

Fastest ways to remove PMI

There are several practical strategies to get PMI removed sooner. I’ll walk through the most effective options, with pros/cons and realistic numbers.

1) Pay down principal faster

This is often the most direct and reliable method. Extra principal payments reduce your loan balance and bring you closer to the 80% LTV cancellation threshold.

“Paying extra toward the principal is the single most effective way to remove PMI faster—every extra dollar goes toward equity,” says Jane Smith, CFP at Skylight Financial.

Example scenario (rounded for clarity):

• Home price: $400,000
• Down payment: 5% ($20,000)
• Loan amount: $380,000 (95% LTV)
• Interest rate: 4.00% fixed, 30-year

To reach 80% LTV you need the loan balance to fall to $320,000. That means paying down $60,000 of principal. If you stick with the standard payment only, you’ll reach 80% LTV in around 8 years. But adding extra payments accelerates this significantly:

Note: These are illustrative estimates based on the example numbers. Exact timing depends on your interest rate and amortization schedule.

2) Make larger down payment at purchase (if you can)

This is preventative: if you can put down 20% at closing, you avoid PMI entirely. Even moving from a 5% to a 10% down payment will reduce PMI and shorten the time to cancel.

For buyers who are still in the planning stage, consider delaying purchase by a year to save more, or look into gift funds (if your lender allows) that increase down payment and reduce PMI.

3) Refinance once you have enough equity or rates are favorable

Refinancing can remove PMI if you refinance into a new loan with an LTV of 80% or lower. This route has two main considerations:

• Refinancing has closing costs—commonly $3,000–$6,000 on a typical mortgage. You should run a break-even analysis: how long until savings from dropping PMI and/or lower rate offset the refinance costs?
• If rates are higher now than your current loan, refinancing just to remove PMI usually doesn’t make sense unless you have substantial equity and low closing costs.

Example: If you have $50,000 in equity and rates are down, refinancing to remove $2,700/year in PMI could pay back closing costs in 2–3 years and be worthwhile.

4) Reassess with a current appraisal (using home appreciation)

If your home’s market value has increased since purchase, you may already have 20% equity. Lenders generally allow borrowers to request PMI cancellation based on a new appraisal, but:

• Most lenders require the borrower to pay for the appraisal—typically $350–$700 depending on region.
• The lender will still check that you are current on payments and that the property condition is acceptable.

“If your neighborhood has seen strong appreciation, getting an appraisal can be a surprisingly inexpensive way to remove PMI early,” says Mark Johnson, a mortgage broker with 12 years’ experience.

5) Ask about PMI removal rules and servicer options

PMI policies can vary among servicers. Some offer faster or more flexible cancellation policies, particularly for borrowers who makeup-up enough principal through payments. Always:

• Contact your mortgage servicer and ask exactly what documentation they need for cancellation.
• Request a payoff schedule or an amortization statement showing when your balance will reach 80% and 78% thresholds.
• Ask whether they accept a homeowner’s statement of value or require a full appraisal.

6) Use biweekly payments or one extra payment per year

Making biweekly payments or an extra payment each year reduces principal faster without a huge monthly squeeze:

• Biweekly: split your monthly payment in half and pay every two weeks. Over a year you’ll make 13 full payments instead of 12, accelerating principal reduction.
• Extra yearly payment: if you can’t handle an extra $300–$800 per month, saving up and making one extra annual payment can still shave years off your mortgage schedule.

7) Recasting the mortgage (if your lender allows)

Mortgage recasting lets you apply a large lump-sum principal payment and have the lender re-amortize your loan to lower monthly payments—without the full expense of refinancing. It won’t remove PMI unless that lump-sum drops your balance below 80% LTV, but it’s cheaper than refinancing.

Typical recast fees are modest—commonly $300–$500—making it an attractive option if you come into a chunk of cash (inheritance, bonus, etc.).

Costs to consider when trying to remove PMI

Make sure you weigh these common costs against PMI savings:

• Appraisal cost for value-based cancellation: $350–$700
• Refinance closing costs: $3,000–$6,000 (varies by loan size and region)
• Potential prepayment penalties (rare on modern mortgages but check your note)
• Opportunity cost of using cash reserves: could that money earn more elsewhere?

Comparison: strategies at a glance

How to request PMI cancellation: step-by-step

1. Check your mortgage note and servicer’s PMI policy. Note any required conditions (on-time payments, no subordinate liens).
2. Request a current principal balance and an amortization schedule showing projected dates to 80% LTV and 78% LTV.
3. If you believe you have 20%+ equity due to appreciation, ask the servicer whether they’ll accept a new appraisal and who pays for it.
4. Submit a formal written request to cancel PMI when you meet 80% LTV or have evidence of required equity. Keep records of your communication.
5. Confirm in writing when the servicer will stop billing PMI. Ensure an official letter or an updated loan statement shows the removal.

Common pitfalls and how to avoid them

• Assuming automatic removal: Servicers must cancel at 78% LTV automatically, but your loan must be current and have no other issues. Monitor statements.
• Using current market value incorrectly: Lenders will often require an appraisal to accept a higher current value—don’t assume rising Zillow estimates will trigger cancellation.
• Forgetting second liens: If you took out a second mortgage or HELOC, your servicer might deny PMI removal unless that subordinate lien is addressed.
• Skipping documentation: Always get confirmation in writing that PMI has been removed.

When PMI removal doesn’t make financial sense

Sometimes continuing PMI for a short time is better than other options. Examples:

• If a refinance would cost $5,000 but canceling PMI only saves you $200/month, it could take over two years to break even. If you plan to sell within a year, it might not be worth refinancing.
• If an appraisal would cost $600 and your servicer is unlikely to accept it due to condition issues, paying for that appraisal may be wasted money.

Real-world example: quick math

Suppose you pay $269/month in PMI (from earlier example). That’s $3,228/year. If paying an extra $400/month toward principal removes PMI 3 years earlier, your direct savings on PMI are about $9,684. You also build equity faster and pay less interest overall. Contrast that with refinancing that costs $4,500: paying down principal yourself in this example is the better short-term move.

Final tips

• Track your loan balance: request annual statements and a payoff schedule so you can plan a cancellation request at the right time.
• Keep emergency savings intact: accelerating PMI is great, but don’t drain reserves that protect you from unexpected financial shocks.
• Talk to the servicer early: they will tell you exactly what they require for PMI removal and any associated fees.
• Consider professional advice: a mortgage officer or CFP can run the exact numbers for your loan and goals.

PMI can be a temporary cost—often avoidable sooner than you think. Whether you accelerate principal payments, request an appraisal, or refinance at the right time, removing PMI can free up hundreds of dollars per month and speed your path to full home equity.

Quick takeaway: If you can comfortably make modest extra principal payments, that’s usually the fastest and lowest-cost path to removing PMI. Otherwise, evaluate appraisal, recast, or refinance options based on fees and timing.

If you’d like, I can run a tailored example for your exact loan numbers (loan amount, interest rate, monthly payment, current balance) and show how much time and money each strategy could save you. Just share those details and I’ll create a clear, personalized plan.